Saturday, August 30, 2008

10 Cities Where Jobs, Home Prices Are Growing

To determine where home prices are expected to rise most in the next couple of years, Forbes looked at projections for housing starts from the National Association of Home Builders and job-growth projections from Moody’s

Forbes identified cities that are likely to be vibrant markets because jobs are increasing and the housing market wasn’t overbuilt during the boom.

"The logic is pretty straightforward," says Mark Zandi, chief economist at Moody's "People will spend as much on housing as their income will allow them. House prices are very closely tied to household income over the long run when you look at business cycles."

According to Forbes, these are the 10 cities where home prices are most likely to rise:
  • Albuquerque, N.M.
  • Charlotte, N.C.
  • San Antonio, Texas
  • Portland, Ore.
  • Austin, Texas
  • Salt Lake City, Utah
  • Colorado Springs, Colo.
  • Minneapolis
  • Atlanta
  • Oklahoma City

Source:, Matt Woolsey (08/25/2008)

Safe Tax Tactics: Avoid an IRS Audit

Following a few simple rules can reduce your risk of an audit by the IRS, and protect yourself in the event that you are audited.

As a self-employed person, you are three times more likely than an employee who receives a W-2 form to be audited by the Internal Revenue Service, according to 2005 data from the IRS.

Combine that with the fact that the number of audits of small corporations has been on the rise in the last few years, and you have the potential for a real hassle.

But don’t despair; there are several things you can do to reduce your chances of being audited and to protect yourself in the event that you are.

File on time. Make sure you file both your income tax return and quarterly estimates before the deadlines. Nothing throws up a red flag and says “audit me” more than consistently filing your returns and quarterlies late. If you can’t file on time, be sure to file an extension. Remember, though, that extensions don’t eliminate interest charges.

Keep good records. One particularly vexing issue for salespeople who use their cars for business is substantiating business mileage with a properly documented mileage log. Few mileage logs are up to IRS standards. The IRS will accept either paper or computer-generated logs, but the IRS tends to view computer logs as less credible.

Double-check meal and entertainment deductions. Meal and entertainment costs are deductible up to 50 percent if they are ordinary (commonly done) and necessary to your business and are either directly related to the active conduct of your business or directly preceding or following a substantial business discussion on a subject associated with your business. Ordinary and necessary costs are those considered helpful and common practice in your industry. You can entertain business associates in nonbusiness settings such as restaurants, theaters, sporting events, and nightclubs, provided the entertainment directly precedes or follows a business discussion. Business associates would include clients, prospective clients, suppliers, employees, partners, or advisers. You should document where the meeting was held, with whom, and the purpose of the meeting. Keep this information with the receipt.

Classify your workers properly. A top audit trigger is a business—such as a real estate brokerage—that treat workers as independent contractors. Questions are more likely to arise about the employment status of office personnel or assistants working for salespeople. If the IRS rules that these workers are employees, you could owe employment taxes, penalties, and interest. While federal tax law provides a safe harbor that classifies real estate salespeople as independent contractors, unlicensed assistants do not have such protection. One important factor in determining independent contractor status is behavioral control, or to what degree workers control how, where, and when they work. If a worker receives extensive instructions on how work is to be done, it suggests employee status. If a worker receives benefits such as paid leave, health insurance, or a retirement package, this might also indicate employee status. For further details on the distinctions between independent contractors and employees, go to and read Publication 1779.

Review IRS audit guides. Audit technique guides were developed by the IRS to assist its agents in performing examinations. These guides contain examination techniques, industry issues, business practices, industry terminology, and other information to assist examiners in performing audits for particular industries. These guides are available to the public at the IRS Web site so you can obtain them and learn in advance what issues the IRS will examine during an audit.

Get good advice. If you’re not aware of new twists in the country’s constantly changing tax laws, you might cost yourself money. If you have a question regarding possible deductions or how to report income, ask a tax professional or call the IRS directly. The money that you spend for good advice up front can pay you back many times over into the future.

Follow these easy steps, and you’ll reduce your chances of an IRS audit. At the very least, you’ll have appropriate backup for your deductions to satisfy even the toughest auditor.

Source:National Association of REALTORS® (8/30/08)

Probate vs Trusts

What is Probate?

Probate is a court process, with or without a Will, which determines the valuation and the distribution of a deceased person’s property.

Through the Probate Court, the Probate Judge makes sure your debts are paid, establishes clear title to your property, and then distributes what remains of your assets according to your Will or applicable law, if you do not have a Will.

The length of probate varies. In some instances, probate can be relatively long, but it may take months to several years in some circumstances. Some probates have even taken much longer. In certain situations, the availability of informal probate allows for minimal or no contact with the courts, and may reduce the time required to probate a Will.

What is Living Probate?

When an individual becomes unable to manage his or her personal or business affairs for any reason (Alzheimer’s, stroke or mental incapacity), legal guardianship can be established.

Through the court proceedings, an individual applies for and may be granted the legal authority to handle the financial and personal affairs of the incapacitated person.

These court proceedings can be costly (attorney fees), court filing fees, time consuming, stressful, and potentially embarrassing to the family (court records are public information).

What is the Cost of Probate?

The cost of the probate process may be hundreds to several thousand dollars depending on a variety of factors, including the value of your estate. Informal probate, if available for your estate, may reduce these expenses.

Disadvantages of Probate

  • Court Costs
  • Waiting Period
  • Possible Expenses, including Attorney Fees
  • Possible Public Disclosures of Personal Financial Matters
  • Potentially Time Consuming and Disruptive
  • Potentially Stressful to Surviving Family Members and Beneficiaries

What is a Living Trust?

Basically, a Living Trust is a legal entity that is created to hold title or ownership to your designated assets.

Under your direction, title to your designated assets is transferred from yourself individually to your Living Trust in which you serve as the Trustee. You retain control of the Trust Property, because you are the Trustee of the Living Trust.

A Revocable Living Trust holds the title to your assets, but allows you complete control during your lifetime and at your death provides for the transfer of all trust assets validly placed into your trust to your named beneficiaries without the necessity of probate.

Structure of a Trust

  1. The Trustor: A person who places their assets into the Trust – you and your spouse.
  2. The Trustee: A person who controls the assets of the Trust – you, or your designee.
  3. The Beneficiaries: You are the beneficiary during your lifetime. Upon your death, those whom you have designated in your trust will be the beneficiaries. Typically beneficiaries include: children, grandchildren, loved ones, and charities.
  4. The Successor: A designated person or Trust Company who, upon your death or incapacitation administers the assets of your Trust and, ultimately, distributes the assets of your trust to your beneficiaries, in accordance with the instructions previously set forth by you as described in the Trust. The Successor is usually the eldest or most competent child, but can be any qualified person of your choosing

Saturday, August 23, 2008

What is an Easement?

Easement - An easement is the right to use another person's land for a stated purpose. It can involve a general or specific portion of the property.

Right-of-Way - A right-of-way is a type of easement that gives someone the right to travel across property owned by another person.

An easement can benefit a property.
Ms. Smith owns a tract of land that borders the Nantahala National Forest, a popular area for hiking, climbing, rafting, and fishing. Mr. Scott lives next door to her, but his land does not touch the National Forest. To avoid trespassing, he must access the Forest by walking or driving to a public entry point.

Instead, Ms. Smith grants an easement allowing present and future owners of Mr. Scott's property to cross her land to access the National Forest. It becomes part of the deed for both properties.

  • An easement can benefit an individual or a business entity.In the example above, a tract of land was granted an easement so that its owners could use a neighbor's land to access a public area. Ms. Smith could grant an easement to another individual to do the same, but without adding it to her deed. That type of easement normally expires at a specific time or event or upon the death of the person who benefits from it.

  • An easement may give a utility company the right to erect power lines or bury a gas pipeline across a tract of land.
    A housing development might possess an easement that allows it to build and maintain a water storage facility.

  • Both easements above would probably be included in a deed description and remain in place if the land is sold.

How does an easement affect the person who grants it?

The landowner who grants an easement usually cannot build structures within an easement area or use fencing that would hinder access. Other activities might also be prohibited. Before you purchase property you should know where all easements are located and what restrictions are associated with them.

Can easements affect property values?

It's possible.

  • Several easements on a tract of land might seriously limit the choice of building sites.

  • High tension power lines running through an easement near an otherwise great building site can be unsightly. Resale values may be affected since many people feel that living too close to power lines is a health risk.

  • Buyers may simply not like the idea that others have a right to use the land in some way.

Don't assume that because an easement is not currently being used it will never be used. As long as an easement is a part of your deed there's always a possibility that the individual who benefits from it will decide to enforce it.

Talk to an experienced real estate attorney to find out how and when an easement can be terminated.

Defaults on "Liar Loans"/Stated Income Loans Rise

The next category of mortgages going bad are the so-called “liar loans.” They were approved without the borrower having to prove that they had an income or assets.

Some home owners with these loans are stuck. They can’t refinance because housing prices in the market where they were the most common have declined.

Losses on liar loans could total $100 billion, according to Moody's That's on top of the $400 billion in expected losses from subprime loans. Moody’s warns that these troubled loans could prolong the credit crisis another two years.

Fannie Mae and Freddie Mac, the largest buyers and backers of mortgages, lost a combined $3.1 billion between April and June. Half of their credit losses came from sour "liar loans," or known as Al-A.

News of these losses are driving down stock prices for Fannie Mae and Freddie Mac, making it more likely that the U.S. Treasury Department – and ultimately taxpayers – will have to bailout the quasi-public banks.

Source: The Associated Press, Alan Zibel (08/18/08)

Sunday, August 3, 2008

10 Cities Where Cost of Living Is Growing Fast

Forbes magazine looked at inflation in the 40 largest metro areas in the U.S. to see where prices were rising fastest.

The numbers were supplied by the Bureau of Labor Statistics and Moody’s and reflected changes between January and June 2008.

Resetting mortgages, rising food prices and runaway fuel costs are the biggest sources of the pain.

Here are the top 10 cities with the highest annual inflation rates.

  1. Seattle, 5.82 percent

  2. Dallas, 5.82 percent

  3. Washington, D.C., 5.74 percent

  4. Miami, 5.71 percent

  5. Portland, Ore., 5.68 percent

  6. San Jose, Calif., 5.61 percent

  7. Milwaukee, Wisc., 5.61 percent

  8. Tampa, 5.60 percent

  9. Phoenix, 5.44 percent

  10. Los Angeles, 5.41 percent

Source: Forbes, Matt Woolsey (07/18/2008)